Donaldson to Quit; Bush Nominates Cox as Replacement

When asked what he believed were some of the most important actions taken during his chairmanship, Donaldson first noted hedge fund manager registration. The hedge fund business is a “$3 trillion industry that wasn’t being regulated at all,” he said. Asking hedge fund managers to register with the commission is a “benign way to regulate the industry,” he argued, stating that the SEC “wants to get the most fundamental knowledge about the industry.” An independent hedge fund firm is now suing the SEC over the ruling. He also pointed to the mutual fund reform rules, as well as regulation National Market System (NMS), which he called a “hugely important” rule. He also applauded the revamped managerial structure of the SEC as well as the commission’s new risk management approach. Important issues that have yet to be finalized, he said, are disclosure of executive compensation and a reinterpretation of the 1940 Securities Act, which is under way.

Donaldson’s departure at the end of June, along with Goldschmid leaving at the end of July, leaves a number of proposals hanging in the balance. Form ADV Part II, soft dollars, and e-mail retention guidance have yet to be finalized, but are “very ripe” at the staff level, says David Tittsworth, executive director of the Investment Adviser Association in Washington, though he notes that “the staff doesn’t vote.”

In his comments at the White House following his introduction by President Bush, Cox called the SEC “one of the best run agencies in the federal government.” Cox is the chairman of the House Homeland Security Committee and has represented Orange County, California, in the House since 1988. He served in the Reagan Administration as a senior associate counsel to the President, and is a Harvard Business School and Harvard Law School graduate.